FX options wrap - FX eruption, EUR topside, short gamma, CNH alert
Mild USD recovery/consolidation takes front-end expiry FX option implied volatility off its most recent highs. However, setbacks are proving limited amid the strong demand and high premiums attached to post NFP options - reflecting the importance of this event to the scale of the September 18 U.S. rate cut.
Dealers expect overnight expiry USD/JPY implied volatility to be around 25.0 - a premium/break-even of 105 JPY pips when it eventually includes the NFP from next Thursday - only the third highest NFP FX volatility risk premium in 2024. One-week expiry implied volatility will include the NFP risk premium from this Friday.
EUR/USD has seen a renewed pick-up in demand and premium for downside gamma, evidenced by strong and sizeable demand for short dated expiry EUR put options such as Monday 1.1050's at 6.3 on 400-million euros. Benchmark 1-month 25 delta risk reversals have also seen a sharp reversal to 0.1 from their new 4-year highs at 0.4 for topside over downside strikes this week.
USD/CNH 1-month expiry implied volatility reached 5.3 from 5.1 and 1-month risk reversals were paid at 0.7 CNH calls over puts when spot dropped to threaten a 7.1000 breach in Asia.
For more click on FXBUZ
EUR/USD 1-month 25 delta risk reversals https://tmsnrt.rs/4g2yNbe
1-week and 1-month USD/CNH FXO implied volatility https://tmsnrt.rs/4e2BjMN
1 week expiry FXO https://tmsnrt.rs/3yND5CH
(Richard Pace is a Reuters market analyst. The views expressed are his own)
</body></html>Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
